Case law: UK Supreme Court Decision on CMA CGM Libra

Alize 1954 and another v Allianz Elementar Versicherungs AG and others [2021] UKSC

Contracts (Carriage of goods by sea) – Seaworthiness & due diligence – Defect in passage plan

Facts of the case

On 18 May 2011, the container vessel, CMA CGM LIBRA, grounded while departing from Xiamen, China en route to Hong Kong. The dispute between the owners of the vessel and the cargo interests arose when the owners declared General Average (GA) and the cargo interests declined to contribute.

The cause of the grounding was determined in the first instance judgment to be ‘the defective passage plan and the master’s resulting negligence in deciding to navigate outside the buoyed fairway’. It was found that the passage plan (which consisted of the pro-forma passage plan document and the vessel’s working chart) was defective and the relevant charts failed to note the necessary warnings showing that water levels were shallower than recorded.

The cargo interests had argued that these failings rendered the vessel unseaworthy. This, they argued, meant that there was an actionable fault by owners in failing to exercise due diligence to provide a seaworthy vessel. As such, owners lost their right to GA contributions under The York-Antwerp Rules.

The owners, on the other hand, had argued that defective passage planning does not render a vessel unseaworthy, and that any failure should fall under the error of navigation exception found under Article IV Rule 2 (a) of the Hague Rules ‘errors of crew or servants in the navigation or in the management of the ship’.

In proving that the owners had exercised due diligence to provide a seaworthy vessel at the beginning of the voyage, the owners argued that it was enough that the ship was equipped with the necessary equipment and employed competent crew to enable safe navigation.

Decision of the Admiralty Court

The owners commenced proceedings against the cargo interests for unpaid GA contributions. The judge dismissed the owners’ claim, deciding that the vessel was unseaworthy within the meaning of Article III, Rule 1 of the Hague Rules. In reaching this decision, the judge applied the ‘prudent owner test’, namely ‘would a prudent owner have sent the ship to sea with the relevant defect without requiring it to be remedied, had he known of it?’. Applying this test, which the judge called a conventional test of unseaworthiness, he found that a prudent owner would not allow their vessel to depart with this defective passage plan.

The judge also held that it was not sufficient for owners simply to employ competent crew and provide the necessary equipment to meet their due diligence obligations. Instead, it was found that owners were responsible for the actions of the crew in failing to use reasonable skill to prepare the passage plan adequately, and thus owners had not exercised due diligence.

Decision of the Court of Appeal

The owners appealed, arguing that there are distinct and separate obligations regarding (i) the exercise of due diligence to provide a seaworthy vessel on the one hand, and (ii) matters of navigation and management of the vessel on the other, and that the crew’s navigational actions and nautical fault could not relate to the carrier’s duty to provide a seaworthy vessel. 

The Court of Appeal dismissed the appeal, finding that ‘a properly prepared passage plan is an essential document which the vessel must carry at the beginning of any voyage. There is no reason why the absence of such document should not render a vessel unseaworthy’.

Decision of the Supreme Court

Owners again appealed. The issues put forward to the Supreme Court were:

1. Did the defective passage plan render the vessel unseaworthy for the purposes of Article III Rule 1 of the Hague Rules; and,
2. Did the failure of the master to exercise reasonable skill and care when preparing the passage plan constitute want of due diligence on the part of the carrier for the purposes of Article III Rule 2 of the Hague Rules?

Owners again sought to distinguish due diligence and matters of navigation. Further, they submitted that the seaworthiness obligation concerned whether the vessel was fit in itself for the purpose of safe navigation. This, they said, concerned an attribute of the vessel, rather than something ‘extrinsic’ such as a passage plan, which recorded a navigational decision.

The Supreme Court upheld the decisions of both the Court of Appeal and first instance in that the vessel was unseaworthy because of the defective passage plan.

It found that the crew’s failure to navigate the ship safely and prepare a suitable passage plan could constitute lack of due diligence exercised by the carrier. Although, the preparation of the passage plan was a matter of navigation, which could fall within the exception of Article IV, Rule 2(a) under the Hague Rules, the exception could not be relied on where there has been a breach of Article III Rule 1 of the Hague Rules ‘carrier shall be bound before and at the beginning of the voyage to exercise due diligence to make the ship seaworthy.’. Furthermore, the court found that if the vessel was unseaworthy, it makes no difference whether this was caused by owner’s negligent management or negligent navigation.

Other findings of the Supreme Court include:

• The prudent owner test (see above) is an appropriate test of seaworthiness.
• Providing the necessary equipment and competent crew is only one aspect of the owners’ obligation to provide a seaworthy vessel.
• Confirmation that the owners’ obligation under Article III Rule 1 to exercise due diligence to make the vessel seaworthy is non-delegable. This includes when the task may have a navigational element to it, such as preparation of a passage plan. Accordingly, owners cannot contract out of, or otherwise be relieved of, their responsibility by delegating it to the crew.

Comment

The Supreme Court’s decision is significant in confirming owners’ obligation under Article III Rule 1 to exercise due diligence to provide a seaworthy vessel includes ensuring that proper passage planning takes place. The provision of necessary equipment and competent crew alone will not mean that owners have exercised due diligence.

In terms of wider applicability, it is worth noting that this case was unusual and may be distinguished on a number of counts. The passage plan was, for example, defective in numerous ways, such as including wrong information, the plotting of wrong courses on the chart, the failure to do proper under keel clearance calculations, and, most importantly, a key warning from the port authority’s notice to mariners regarding uncharted shallows outside the dredged channel not being marked on the charts or included in the passage plan. 

Further, the master accepted at trial that if the passage plan / charts had included reference to the uncharted shallows outside the channel, he would not have sailed through that area. This was significant as it confirmed the direct causative link between the defective passage plan and the master’s resulting negligence in deciding to navigate outside the dredged channel. (The master’s concession is also a salient reminder of the risk of cross examination of witnesses at trial where such concessions or deviations from previously stated evidence can fatally undermine a case or push it on to a very different course.) 

These points emphasise that the issue of causation, which is essentially a question of fact, is key in cases such as this. It is not enough for claimants simply to point to any or insignificant defects or omissions in a passage plan and allege unseaworthiness (remembering that the burden of proof regarding unseaworthiness remains on cargo interests / the claimants). Instead, any such issues need to be sufficiently serious (for example, to endanger the safety of the vessel) and be causative. The seriousness of such defects or omissions is likely to be fertile ground for further litigation, for example on whether they meet the prudent owner test. That is likely to place detailed attention on the facts in each case, which will then likely turn to arguments on whether any defects or omissions were causative of the loss suffered.

Another important point concerns timing and potential difference in liability in relation to (i) working on the passage plan before the voyage and (ii) execution and monitoring of the passage plan during the voyage. 

With regard to the former, the Supreme Court concluded, ‘Given the ‘essential importance’ of passage planning for the ‘safety … of navigation’, applying the prudent owner test, a vessel is likely to be unseaworthy if she begins her voyage without a passage plan or if she does so with a defective passage plan which endangers the safety of the vessel.’ In other words, owners may be liable in the event of the master’s negligence prior to the commencement of the voyage in preparing the passage plan (and assuming the defect meets the prudent owner test).

However, it was also stated, ‘If, for example, the causative negligence consisted of errors made by the master or deck officers in the execution or monitoring stage of passage planning during the voyage then prima facie the carrier would be able to rely on the nautical fault exception.’ In other words, owners may not be liable for negligence during the voyage as they can rely on the Article IV, Rule 2(a) defence. The timing of any negligence could be of key importance.

Of course, this assumes that there were then no separate issues such as a defective passage plan at the outset, incompetent crew, or a failure to have systems in place to monitor or execute the passage plan. Moreover, matters could become complicated if there are potentially negligent acts both in relation to, say, preparation of the passage plan and the crew’s actions during the voyage. This again highlights the issues of the factual matrix and causation, noting that each claim will need to be looked at on a case by case basis.

Lastly, the court confirmed that delegating the preparation of a passage plan to the master will not absolve an owner from liability for a failure to exercise due diligence, and that it makes no difference that navigation is the responsibility of the master and involves the exercise by the master of his / her specialist skill and judgment. While this may cause some disquiet to owners generally, the court has pointed out that the same is true of much of the work necessary to make a vessel seaworthy, for example, work done by ship repairers or the chief engineer on the ship’s engine. These are others who have specialist skills and do work to make a vessel seaworthy, and for which an owner remains responsible for any failure to exercise due diligence in their work.

Categories: Caselaw, Defence